862.5151/8–2449: Telegram

The United States High Commissioner for Germany (McCloy) to the Acting Secretary of State

top secret

CC 9524. For action to Department of State for Secretary1 and Under Secretary and ECA Foster.

For info to AmEmbassy Paris for Bruce, AmEmbassy London for Holmes, OSR Paris for Katz, HICOM Frankfurt for Collisson from HICOM.

Subject is German devaluation:

Had long meeting with British and French High Commissioners and respective financial advisers. Poncet opened by stating categorically that his instructions precluded his agreeing beyond 2% [20%] devaluation accompanied by notice to Germans that they must within reasonable period, say thirty days, equalize export and domestic price of industrial coal and coke. I followed by:

(1)
Making general statement as to: (a) far reaching implications of this first important matter being well handled by High Commission as this initial significant act by High Commission is being watched by East, West and Germany; (b) effect on German Government if its first act is vetoed by High Commission; (c) unfavorable effect already created by delay in Germany accomplishing devaluation when 18 other nations already devalued with such speed.
(2)
Then stated specific US position: (a) first consideration is that High Commission should not disagree with any reasonable proposal [Page 459]of German Government; (b) difference between 15%, 20% or 25% devaluation secondary to importance of promptly establishing any rate within reason; (c) doubtful whether Germans could hold 15% rate which French initially suggested; that more than 25% would be too much but that any rate from 20% to 25% is within reason; (d) if Germans suggest 20% we would approve and if they persist in 25% we would not disapprove though would make clear that we greatly prefer 20%; (e) we appreciate effect of devaluation on prices especially coal and many adjustments would have to be made; that coal price study should be undertaken immediately with view to correcting inequities between German domestic and export prices but that to condition agreement regarding devaluation would be unwise and unfortunate as would accentuate to the world that High Commissioners are fixing rate in interest of their own countries rather than Germany which is their present ward. I outlined other appealing economic and political arguments; (f) the proposed compromise on difficult coal aspect embodying dual arrangement that German Government must take action within seven days in agreement with High Commission; (1) To neutralize effect of French franc devaluation by various methods such as (x) increasing internal coal prices, by eliminating subsidies and equalization funds and any other discriminating measure or (y) decreasing external prices or (z) pricing export coal in deutschmarks and (2) To complete within thirty days, in consultation with High Commission review of German coal prices in relation to all countries with view to equalizing export and internal prices.
(3)
Robertson stated British position (a) would agree to any devaluation from 0 to 30%; (b) in view French position British suggest saying to Germans, if they propose 25%, difficult to agree and fear delay, but if 20%, High Commission would agree; (c) regarding coal cannot agree to outright equalization as do not have it in Britain. Robertson thinks he can go far toward meeting French position via my above outlined suggestion. He further agreed with my view that we should not condition decision on devaluation upon coal action but should simultaneously tell Germans about it though give them some leeway in not announcing it for few days after devaluation announcement. As there was clear cleavage between French insistence on Germans within 30 days ending all disparity between domestic and export price of coal and my suggested plan as outlined in (f) above, meeting recessed for 4 hours to determine whether financial advisors could resolve difference involved or work out compromise acceptable to all and to give Poncet opportunity further discussion with his Foreign Office.
(4)
Upon reconvening it became immediately apparent he had no further leeway. My impression is this due largely to considerations outlined in Bruce cable 61 to me of 22 September. This impression fortified by private remarks one of his staff made to one of mine during recess as to precarious position French cabinet unless it can demonstrate some success on some important issue. Poncet indicated that he would if necessary, use appeal powers available to outvoted High Commissioner with resultant 30 or 21 day delay depending on which clause of agreement he bases appeal. All agreed this would have grave effects and must therefore be avoided if at all possible. I even went so [Page 460]far as to say if 3 High Commissioners could not settle this type matter here I seriously question feasibility of continuing as High Commissioners. With view obtaining agreement Poncet tonight cabling his Foreign Office. Three High Commissioners arranging conference with Adenauer at Hotel Dreesen [Dresden?], Bad Godesberg, Bonn at 2000, September 25. Will keep you posted on further developments and hope can evolve satisfactory procedure. Would appreciate any suggestions.

[In the remaining section of the source text McCloy reported on the High Commissioners’ consideration of the reparations question.]

McCloy
  1. Mr. Acheson was attending the Fourth Regular Session of the General Assembly of the United Nations at New York.